The deal, which includes US$70-million in cash and roughly 56 million shares of TILT’s Canadian Securities Exchange-traded stock, comes less than a month after Ontario-based Canopy Growth Corp. bought German vaporizer maker Storz & Bickel for $220-million in cash. Jupiter, which produces vaporizer batteries and cartridges for more than 700 brands around the world, and had US$77-million in total 2018 sales, gives TILT access to what CEO Alex Coleman expects will be among the most lucrative aspects of the recreational cannabis space.

“If you look at the market, about half of it is dried flower and declining, over 30 per cent of the market typically tends to be vape and then you’ve got a mix of edibles and other consumables and topicals,” Mr. Coleman said. “And that 30 per cent of the market that is vape is definitely growing the fastest.”

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Last month, cannabis market research firm BDS Analytics published a report tracking sales growth for different cannabis product categories for the first ten months of 2018. While sales of dried flower in Arizona, Colorado, California and Oregon grew roughly 26 per cent from January to October, sales of vaporizable cannabis oil in those four states increased by more than 81 per cent over the same period, the BDS report found.

TILT was formed last month as an amalgamation of several different companies specializing in cannabis-related consulting, software, cultivation and last-mile delivery applications. The company raised US$119-million in an initial public offering that saw its CSE-listed shares begin trading on Dec. 6, with Cannacord Genuity analyst Bobby Burleson initiating coverage of the stock one week later with a “speculative buy” rating and a $6/share price target.

“TILT is implementing a differentiated approach to building a dispensary network, wholesaling in-house and third-party brands through a franchise-like model that provisions turn-key cannabis infrastructure to license holders in exchange for retail shelf space and stocking fees,” Mr. Burleson explained to clients at the time. “We believe this ‘affiliate’ model should allow TILT to rapidly scale its dispensary network across multiple states, while limiting capex and maximizing cash flow.”

In Canada, where cannabis vape products are expected to become authorized for recreational sales by mid-October, TILT expects to have Jupiter products on store shelves before the end of this year. However, Mr. Coleman noted “a large part of our presence on the shelf will be as a white-label product for [vape] pens” sold by other brands.

“We think there is just way more demand coming [for cannabis vaporizer products],” Mr. Linton said.

TILT’s Mr. Coleman is not concerned about competition at this stage. He argues the space still has plenty of room for innovation.

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“You have to consider that the first generation of cannabis [vaporization] products still fall short of fully appreciating how diverse the oils are, whether they are cold-pressed or, depending on the extraction methodology they can all have different viscosities and therefore all need a different way to combust,” Mr. Coleman said. “That is probably the biggest distinction between let’s call it old generation and new generation cannabis.”

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